Not Yet A Sign Of Turnaround In Cree's Core Lighting Business

Cree, Inc. CREE reported beat results for FQ2, primarily driven by a one-time upfront licensing settlement, while guiding to lower-than-expected FQ3 revenue from continuing operations.

Pacific Crest’s Daniel Baksht maintains a Sector Weight rating on the company.

“We remain concerned about competitors taking share and continue to view the risk/reward for CREE as slightly negative,” the analyst mentioned.

FQ2 Beat

For FQ2, Cree reported revenue of $347 million, well ahead of the consensus and the estimate. The upside was driven by a one-time upfront licensing settlement.

Management noted that the revenue would have come in at the midpoint of the original guidance excluding this settlement.

The non-GAAP EPS came in at $0.30, beating expectations, again largely driven by the one-time settlement.

FQ3 Guidance

For FQ3, Baksht noted that the revenue guidance was below expectations, stating the revenue from the LED lighting business fell 18.5 percent in C2016, while management expects total revenue to decline 13.5 percent during FQ3, driven by seasonality and holidays.

“While we expected a sequential decline, the magnitude is a bit of a surprise to us given favorable comparisons and potential for upside from new products,” the analyst went on to say.

The F 2018 estimates have been lowered due to expectations that it might take longer than anticipated for Cree to regain momentum in its core businesses.

At last check, shares of Cree were up 12.29 percent on the day at $30.78.